BMC proposes 1% surcharge on realty deals budget

This is the biggest such cut in spending by the BMC in the past decade, at least on paper

While the budget has no big-bang new announcements, the good news is that it also does not propose any new taxes or levies immediately.

The richest civic body in the country presented its leanest budget in the past five years on Wednesday, slashing the total budgetary outlay by 32.14% from last year. This is the biggest such cut in spending by the Brihanmumbai Municipal Corporation (BMC) in the past decade, at least on paper.

The civic body’s budget for 2017-18 of Rs25,141 crore is a steep drop of Rs11,911 crore from 2016-17, but civic officials claim this is the BMC’s first bid to make the budget more realistic.

The move comes in the backdrop of the Good and Services Act (GST) roll out this year, which will abolish the BMC’s highest income generator Octroi, which earns the civic body Rs7,000 crore annually, and a failure to meet its revenue targets.

While the budget has no big-bang new announcements, the good news is that it also does not propose any new taxes or levies immediately.

However, in a bid to zero in on alternative sources of income, the civic body has proposed a 1% surcharge on the value of property at the time of sale or purchase. This means if you buy property worth Rs1 crore, you may have to pay Rs1 lakh as surcharge on it to the BMC.

The civic body hopes to mop up Rs3,000 crore into its coffers with this move. However, this would require an amendment by the state government, which has been proposed by the civic body. If the state carries out this amendment, it will come at a heavy cost to homebuyers already troubled by high realty rates and an existing stamp duty of around 6%.

In his budget speech, Mehta drew attention to the financial situation of the civic body. “The BMC has huge committed liabilities in terms of remaining cost of work orders already issued, at Rs9,988.89 crore. I propose to take a detailed review of these liabilities and clamp down on unnecessary expenditure,” he said.

Contrary to the trend, the BMC for the first time will spend lower amounts on all major sectors — roads, storm water drains and solid waste management. The paucity of funds caused by a decrease in collection of development charges and property tax, has also led to a budget dip in allocation of major departments. From Rs2,886 crore that it allocated for construction and repairs of roads last year, the amount has considerably gone down to Rs1,095 crore this year. The crucial storm water drains and solid waste management also registered a significant dip.

One of the biggest allocations has been reserved for the much anticipated Coastal road project at Rs1,000 crore.

“Departments tend to grossly overestimate the Capital Expenditure (spending on development works). However the capacity of departments to spend these amounts is limited. This results in inflating budget and a poor budgetary discipline, it also paints a poor picture of the projected capital works,” Mehta said.

Mehta has stayed away from announcing new infrastructure projects or promising sops, but took a cue from the ruling BJP’s ‘transparent’ stance to make way for reforms. The budget also highlighted digital India and cashless initiative and announced putting as many as 111 citizen services online.

As HT had reported, the budget talks of realistic allocation, Development Plan-linked spending and is high on administrative reforms. With the DP 2034 in its final stages, the budget focused on building public amenities such as an underground parking facility and a multi-purpose working women’s hostel.

Among others, the BMC also announced a slew of administrative reforms to introduce budgetary discipline and keep the finances robust. For instance, an executive assistant will replace stenographers and clerks, among others. In all, the BMC expects to cut down the cost by Rs2,525 crore annually.